Flagstar Bancorp Inc., Troy, Mich., has returned to profitability, posting 1Q13 net income of $22 million, compared with
Michael Tierney, president and CEO said the company saw a “significant improvement in overall credit quality, with a decline in credit costs to the lowest level since 2008.
“In addition, nonperforming loans decreased by 8%, net charge-offs declined by 30% and the total repurchase pipeline decreased by 17%. We also significantly strengthened our capital and liquidity ratios, and continued our efforts to reduce MSR concentrations, as we prepare to meet the requirements of Basel III and the regulatory-prescribed stress tests.”
Tierney added the company’s revenue is heavily dependent on its mortgage banking business. But in 1Q13, it experienced a slowdown in mortgage banking “with reduced demand and tighter margins due to increased competition and excess capacity.
“In response to recent headwinds, we have taken steps to gain market share and improve margins, and are confident that Flagstar remains well positioned to capitalize on future opportunities in the mortgage business. Additionally, we will continue to carefully and aggressively manage expenses to be in line with revenue trends, and improve companywide efficiency.”
During 1Q13, Flagstar originated $12 billion in residential first and second mortgage loans, down from $15 billion in 4Q12 but up from $11 billion in 1Q12.
Gain-on-sale margin (based on loan sales) was 107 basis points compared with 153 bps in 4Q12 and 189 bps in 1Q12.
During the quarter, Flagstar made bulk sales of mortgage servicing rights totaling nearly $11 billion, as part of its strategy to seek opportunistic ways to reduce its concentration of mortgage servicing rights.
Net servicing revenue for 1Q13 was $20 million, down from $25 million in 4Q12 and $33 million in 1Q12. The decrease for the fourth quarter was due to hedging challenges related to interest rate volatility.
Last week Zacks Equity Research made Flagstar its
